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Industry brief: Forest sector and bioindustry in Lapland

The forest industry is the second largest field of industry in Lapland, and it is also growing steadily. The turnover of the entire forest sector in the region is about €1.5 billion and the field employs some 3,600 people. If realised, the large-scale investments planned in bioindustry will increase the current volume significantly.

Facts

  • turnover of €1.5 billion, largely from the pulp and paper industry
  • employment yield about 3,600 person years
  • 5 million hectares of forest, of which two-thirds can be used for timber production
  • the timber resources of the forests have increased 1.5-fold since the 1970s
  • large projects include Boreal Bioref in Kemijärvi and Polar King and Kaidi in Kemi
  • bioindustry is anticipated to grow into a €2 billion business in Lapland

According to the Finnish Forest Centre, the annual turnover of the forest sector in Lapland is about €1.5 billion. The majority of this, roughly €1.1 billion, comes from the pulp and paper industry. The annual yield of forestry is about 270 million, while the wood product industry generates some €180 million in annual returns.

According to the Finnish Forest Centre’s information, the forest sector employed nearly 3,600 people in 2016, with forestry, the pulp and paper industry and the wood product industry as the leading employers.

Within the Lapland region, the forest industry is strongly focused in the Sea Lapland area. For example, Kemi holds the northernmost paper mill in the world, which is owned by one of the largest forest industry companies in the world, Stora Enso.

Forest resources

Of the entire land area of Lapland, 98% (i.e. 9 million hectares) is viable forest industry land. The actual forest area in Lapland spans 5 million hectares, two-thirds of which can be used for timber production.

Forestry and logging are among Lapland’s strongest areas of expertise in terms of the number of people employed by the field.  In 2017, the turnover from forestry and logging in Lapland was, according to Statistics Finland, approximately €220 million, which is 10% of the turnover of these activities across the entire country. Within the region, the field provides employment in the amount of 940 person years.

The realisation of the extensive investment plans in the forest and bioindustries would increase the use of wood in Lapland. Concern for the sustainability of timber resources and the importance of forests as a carbon sink has been brought up in conjunction with the planning of the projects. Forests act as carbon sinks, which means that they  extract carbon from the atmosphere when the quantity of growing timber exceeds logging volumes. Areas where timber is not harvested serve as carbon stores.

According to Natural Resources Institute Finland, a sustainable level for the accumulated harvesting of stemwood in the whole of Finland is about 85 million cubic metres per year. In 2018 the actual accumulated harvesting volume in the country was 78 million cubic metres.

According to Statistics Finland the accumulated inharvesting volume Lapland in 2018 was about 5 million cubic metres, while the sustainable level for the accumulated harvesting of stemwood is estimated as around 7,2 million cubic metres. Currently, in Lapland, the growth of stemwood is well above the total depletion which includes the harvesting.

The Finnish Forest Centre’s numbers indicate that, by the 2010s, the timber resources of Lapland’s forests had increased 1.5-fold from the 1970s. According to a study published by Natural Resources Institute Finland, the volume (cubic metres/hectare) of conifers characteristic of Lapland has increased significantly throughout Lapland in recent decades. Going forward, the northern forest boundary in the region may climb higher in northern Lapland. Climate change is predicted to continue increasing the amount of timber resources, especially in Northern Finland. Currently, forest growth is far ahead of logging rates.

The future is looking bright for the forest sector and the bioeconomy

The outlook for the bioproduct industry is good and significant investments are being planned for Lapland. Current technology is transforming pulp mills into bioproduct mills that can manufacture plenty of other products besides pulp. In addition to this, the mills can generate renewable energy through their processes for themselves and other operators.

The Boreal Bioref biorefinery is being planned for Kemijärvi. Prepared as a Sino-Finnish joint venture, the project equates to an investment of almost one billion euros. If completed, the biorefinery will produce pulp, microcrystalline cellulose and pine oil. The project gained an environmental permit in June 2019, and the actual investment decision is pending until the end of the year.

In the spring of 2019, Metsä Group initiated preparations for a bioproduct mill in Kemi. If completed, the project dubbed Polar King would be the largest wood processing facility in the northern hemisphere. At an estimated investment value of €1.5 billion, the facility would produce softwood and birch pulp and other bioproducts.

Kaidi Finland is planning a second generation biorefinery in Kemi. The new refinery is to use energy wood, harvesting waste and forest industry side streams as its raw materials. This investment would be approximately €900 million in value.

If realised, the planned investments would have significant employment impacts both directly and through the subcontractor network. In fact, a significant cluster is forming around bioindustry in Lapland, which provides a wide range of subcontracting opportunities and generates new business activity.

The Finnish Forest Centre’s regional plan involves promoting the growth of the forest industry and economy. The objectives of the current development plan pertain to developing the roads needed for timber management in Lapland and bolstering the circular economy through the commercialisation of side streams, for example. At the moment, the road network in the region is estimated to be in fairly good condition, and investments are on the horizon with regard to national roads 4 and 21, which cut through the area.

A regional challenge related to forestry in Lapland is that the sector in the region is predominantly state-owned, with many privately-owned forests being rather small in size. In addition to this, almost one-third of the forest area in Lapland is protected, which limits the region’s opportunities in terms of the forest industry. However, the protection arrangements will secure the survival of Lapland’s unique nature and diverse sectoral structure  – for example, 2009 decision to protect the forests in the Forest Lapland area did not, according to the Finnish Forest Centre, compromise timber supply to sawmills but instead served to restore the reputation of Lapland’s forest industry products on the European markets.

One of the strategic goals of the Ministry of Agriculture and Forestry’s National Forest Strategy 2025 is to ensure that Finland in its entirety is a competitive operating environment for various forest-based business operations. The development of the bioeconomy is also among the key projects of the Finnish Goverment. As such, Finland has set its sights on becoming the EU leader in bioeconomy by 2030. Lapland’s bioeconomy program, in turn, aims for making the region the leading part of the country in terms of bioeconomy.